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Bu111 Midterm Review: Wednesday October 16th, 7pm-10pm (BA111)
Bu111 Midterm Review: Wednesday October 16th, 7pm-10pm (BA111)
AGENDA
External Analysis and Critical Success Factors Critical Success Factors Understand factors and their interrelationships Diamond-E Relationship between firm and its external environment What is an External Analysis? PEST Porters Five Forces Data Sources Benefits and Challenges
quality assurance consistently give customer a good value for their money and an up to par product Need to consider universal standard laws longevity of product, quality it was produced with
Encourages customers to buy products/services Builds reputation provides good product means returning business (HOWEVER dont create such an amazing quality product that no one needs to buy a new product ex: dyson)
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Diamond E
Identifies key variables to be considered in strategic analysis Double-headed arrows mean that both aspects influence each other
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Diamond E
Strategy: what opportunities the business is pursuing
determines the resources, organizational capabilities, and the management preferences
The critical linking variable in the model Any variable can either drive or constrain Principal logic: consistency or alignment
strategy must be consistent with internal workings of company (preferences, resources, etc.) strategy must align with the external environmentmay have the best strategy but may not be right for that environment environment is changing, so strategy must adapt
First task: deal with strategy-environment linkage assess forces at work, and their implications
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Diamond E
Organization Influences
Refers to culture, leadership, structure and capabilities
Resources Influence
Financials, capital, human resources
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Diamond E
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External Analysis
The process of
Scanning + evaluating the external environment
Need to look for data, statistics, trends, forecast things et c
External Analysis
But firstWhat are the benefits/challenges of conducting an external analysis?
Benefits Makes managers proactive Provides information used in planning Helps organization acquire necessary resources Cope with uncertainty Improves consistency and performance Challenges Rapidly changing environment hard to keep up with Time consuming Trends and forecasts may not always be 100% accurate (room for error)
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External Analysis
General Environment affects all businesses (have no control over) PEST identifies general trends/changes
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External Analysis
PEST Factor Poli-Legal Definition/Elements Laws and regulations Taxes Trade agreements and conditions Political system Political stability Economic growth Trade balance National debt Economic stability Interest and exchange rates Effect on Business Reflections relationship between businesses and government Affects uncertainties, risk and costs faced by the firm Influences costs, potential sales, and financial uncertainity More government borrowing = less funds for businesses = higher interest rates & taxes Exchange rates affect trade balance
Economic
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External Analysis
PEST Factor Economic Definition/Elements Economic growth Trade balance National debt Economic stability Interest and exchange rates Effect on Business Influences costs, potential sales, and financial uncertainity More government borrowing = less funds for businesses = higher interest rates & taxes Exchange rates affect trade balance
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External Analysis
PEST Factor Socio-Cultural Definition/Elements Customs, values, attitudes and demographic characteristics Effect on Business Influences and customer preferences Influences worker attitudes and behaviours Influences standards of business
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External Analysis
PEST Factor Technological Definition/Elements Technology transfer Effect on Business * Affects buying, selling, communication and information access
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External Analysis
Specific Environment affects all industry participants
Each industry has its own environment that needs to be analysed to gather appropriate information
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Buyers
Few concentrated buyers, standardized products, low switching costs (not tied to you) Standardized products Discretionary products
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What is technology?
What is TECHNOLOGY? (from a business perspective) Anything tangible that affects what is produced, how it is produced and sold, and how the organization is managed. Is always changing, demands constant adaptation NOT limited to computers, internet and information tech.
(Stone age tools, for example)
Technology Positives
Speeds up production Reduces cost Enables larger quantities Increases efficiency Better products Quality innovation Consistent Quality Communication gaps are bridged
Letters vs texting
Technology - Negatives
Easy to recreate (imitate) Excessive Information
Unfamiliarity to organizations Constant change can be a hassle Differences in standards through evolution
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DVDs vs VHS
IT Information technology
The various devices for creating, storing, exchanging, and using information ATM, email, inventory software
Makes collection and access easy and efficient Distance work possible Instant access Ex. Google Docs, Dropbox
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Concepts - Technology
Installed base More customers means more influence Sunk investment (lock-in) Larger = greater resistance to switch Switching costs Complementary goods needed for value; creates vicious or virtuous cycle Network effects value depends on users if no one uses, its pointless
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Technology Standards
Determine compatibility with other products Similar idea done different ways
Market picks a side, loser is out Blu-Ray vs HD-DVD
What did Blu-Ray (Sony) do right?
Bundled Blu-Ray with the PS3 taking a loss (about $200 per unit) Cheapest HD player on the market Won market share
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VIDEO
http://youtu.be/9oKkqpA2ZoI
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Types of Innovations
Knowledge/capabilities challenged: Architecture/ Organization structure challenged: RADICAL INNOVATION (e.g. calculator compared to slide rule) Knowledge/capabilities unchallenged: ARCHITECTURAL INNOVATION (e.g. desktop computers compared to IBM mainframes) INCREMENTAL INNOVATION (e.g. image stabilizing feature added to digital cameras)
Exam Tips
Multiple Choice
Skip if you dont know Go back at the end Why?
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Exam Tips
Mark your exam
Avoid missing a question slashes
Usually better to have a complete exam with errors than a perfect, but incomplete exam
Can always add more if you have time
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Exam Tips
Look over your exam Re-read questions and make sure everything has been answered Can only improve your grade
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Exam Tips
Dont Stress
One exam wont make or break you
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